Leading business analytics firm, Business Monitor International, has released its latest findings on the state of the electronic devices market in Iran.
This year’s consumer spending habits inside Iran have been significantly affected by the recent nuclear deal, with many in the country hoping for a decrease in the foreign exchange rates.
The intelligence company has noted the drop in demand and has said it has revised down its figures over the medium term to reflect the changing trend.
Therefore, BMI believes the prospects of a short-term boom are weak due to the challenging economic environment in 2015.
Nuclear Upshot
The company notes that the nuclear agreement’s potential for easing sanctions is attracting a significant amount of interest from multinational corporations.
It also confirms other analyses that all economic sanctions on Iran will be lifted by the beginning of 2016.
The company adds that sanctions have restricted the development of the Iranian consumer electronic market, with guarantees and third-party support remaining limited.
Exports to Iran continue to pose a huge logistical challenge while key trade routes are closed and restrictions overshadow the financial sector. Many electronic firms have been unwilling to invest without the greater certainty of sanctions relief.
US Reactions
“US companies are not the only ones waiting for greater stability,” BMI notes, adding that even leading Chinese PC company Lenovo stated in early 2014 that it would wait for an agreement between western nations and Iran before formally expanding into the country. However, it has been repeatedly noted that they are, in fact, shipping laptops to the country with no hesitation using grey import methods not to be hit with sanctions for dealing with Iran. Imports of these items are usually conducted by a string of third-party businesses.
BMI adds that the expected removal of sanctions on all consumer electronics by 2016 has raised the confidence of international firms.
However, the firm adds the proviso that despite an increase in interest from foreign electronic firms, there remains a cautious road ahead for all involved, including local Iranian partners.
BMI goes on to say, “After three successive years of negative real GDP growth, we forecast a growth rate of 0.6% for 2015 … and real private consumption growth of 1.0%.”
Depreciation will erode Iranian consumer purchasing power in global markets, making consumer electronic devices less affordable, as well as raising the cost for domestic assemblers reliant on imported components priced in US dollar.
Nevertheless, this is something the consumer has grown used to.
The company notes inflation of 23% in 2015, which is officially placed at 15%, will also continue to dampen Iran’s middle-class consumer confidence.
Black Market Remains
The easing of sanctions and the black market are only one part of Iran’s consumer electronic market, and there exists a large market in volume and value terms right across the device spectrum in their estimate for formal market size. As a result, to a greater extent, economic trends will determine the spending growth trajectory in 2015.
BMI suggests a forecast for 7.4% contraction to a value of $7.46 billion.
Consumer Demand
As one of the side effects of the event, it expects the Iranian consumer electronic market to exhibit a higher growth trajectory over the medium term.
BMI says the nuclear deal’s direct impact on consumer shopping habits will cause “a fall in the price of electronic goods” like iPhones that remain one of the most popular products among urban populations.
It notes that the establishment of formal distribution networks should help bring down the cost of these devices.
BMI forecasts average annual real GDP growth of 4.3% for 2016-19. Further rial depreciation will squeeze US dollar income growth, but despite this it still forecasts a 31% increase to $6,870 in 2019.
Market Share
As usual, BMI notes mobile handsets remain the largest segment in the market accounting for $3.7 billion or 45% of the total share.
“There will likely be a short-term boost to sales once Apple devices become available through official channels in 2016, but the market will continue to be dominated by Samsung and the competitive dynamics with Chinese companies, such as Huawei and Lenovo,” it reported.
Computer hardware was also estimated to have been the second largest consumer electronic market category in 2014 and is expected to continue to account for about a third of total device spending for the duration of the five-year forecast period. However, as other consumer market reports said, computer share overall will continue to diminish as customers move to mobile.
Audiovisual or AV devices are estimated to have been the smallest consumer electronic market segment in 2014, at 20% of the total, and we expect this share to decline to 18% by 2019. The AV segment growth potential is limited by technology trends, including the cannibalization of digital camera demand by the proliferation of multifunctional smartphone ownership.
